Category Archives: Economy

An infrequent article dump to clear the tabs on my computer. Topics include: Latin America; the end of Fannie and Freddie (I can only dream); biblical misconceptions; autism; innovation and unemployment; Leon Panetta’s strategy to cut defense spending; and things happy people do. Enjoy!

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The Washington Post interrupts “the current gloom about the global economy to bring you a word about progress. In Latin America and the Caribbean, the portion of the population living in poverty fell substantially from 1990 to 2010, from 48.4 percent to 31.4 percent, according to a new United Nations report. And this occurred as the population grew from 440.7 million to 582 million.”

Meanwhile, media outlets in Mexico report that over 12,000 people were killed last year in drug-related violence. “Annual indexes of torture, beheadings and the killing of women all showed increases.”

William M. Isaac and Richard M. Kovacevich, writing for CNN Money, explain their plan for closing Fannie and Freddie.

John Shelby Spong, a former Episcopal bishop of Newark, New Jersey, explains the three biggest bible misconceptions: “First, people assume the Bible accurately reflects history. That is absolutely not so, and every biblical scholar recognizes it… The second major misconception comes from the distorting claim that the Bible is in any literal sense “the word of God.” Only someone who has never read the Bible could make such a claim… The third major misconception is that biblical truth is somehow static and thus unchanging. Instead, the Bible presents us with an evolutionary story, and in those evolving patterns, the permanent value of the Bible is ultimately revealed.”

The New York Timesexplains the romantic relationships of those with autism.

On a day early this month, before their planned trip to the animal shelter, Kirsten and Jack stood before a group of young adults with autism at the Kinney Center for Autism Education and Support in Philadelphia, answering their questions while Jack’s father addressed their parents in a different room. “Did you ever think you would be alone?” one teenager wanted to know.

Kirsten answered first. “I thought I was going to be alone forever,” she said. “Kids who picked on me said I was so ugly I’m going to die alone.”

Her blunt tip on dating success: “A lot of it is how you dress. I found people don’t flirt with me if I wear big man pants and a rainbow sweatshirt.”

Then it was Jack’s turn to answer, in classic Aspie style. “I think I sort of lucked out,” he said. “I have no doubt if I wasn’t dating Kirsten I would have a very hard time acquiring a girlfriend that was worthwhile.”

A mother who had slipped into the room put up her hand.

“Where do you guys see your relationship going in the future?” she asked. “No pressure.”

Kirsten looked at Jack. “You go first,” she said.

“I see it going along the way it is for the foreseeable future,” Jack said.

One of the teenagers hummed the Wedding March.

“So I guess you’re saying, there is hope in the future for longer relationships,” the mother pressed.

Francisco Dao, writing for the Washington Post,explores whether innovation is leading to higher unemployment:

Instead of the normal evolutionary rise and fall of industries, our economy is now at something analogous to the Cretaceous-Tertiary extinction event (the end of the dinosaurs). Going forward, those who will prosper will be characterized by their ability to leverage technology, while everyone else will find themselves relegated to obsolescence by exponentially more powerful machines.

What is different now is the power and scale of technology at our disposal. One hundred years ago, “leveraging technology” meant using a better plow to plant more land than your neighbor. Eventually he would go out of business and you would take over his farm.

Today, it means a handful of people at Instagram and Flickr can bankrupt Kodak and put hundreds or thousands of people out of work.

According to the NYT, “Defense Secretary Leon E. Panetta is set this week to reveal his strategy that will guide the Pentagon in cutting hundreds of billions of dollars from its budget, and with it the Obama administration’s vision of the military that the United States needs to meet 21st-century threats, according to senior officials.”

Lastly, Mark and Angel Hack Life reports on 12 things happy people do differently.

The BBC has a great primer on the global economy, especially the Eurozone. Through a series of 60-second video clips, they explain the IMF, how banks go bust, quantitative easing, and the role of the ECB. They also have several articles that tackle those and similar subjects in both the Eurozone and the world economy. Very straightforward, nonpartisan information, and recommended for those who are a bit confused when reading today’s headlines.

What sort of authority does Mr. Clinton bring to writing this book? His admirers will argue that he is the ideal author for a book about fixing the economy, and will point to his record as president — reducing the federal deficit, overhauling welfare, blunting his party’s reputation for profligate spending and presiding over the longest economic expansion on record with falling unemployment, rising incomes and improved competitiveness on the world stage. Moreover, as president and later as founder of the Clinton Global Initiative, he understands the politics and economics of globalization and the dynamics of the technological information age.

But critics will argue that the deregulatory policies promoted by Mr. Clinton’s administration — under the treasury secretaries Robert E. Rubin and later Lawrence H. Summers — contributed to conditions that led to the Wall Street meltdown of 2008 and the subsequent recession. In this book Mr. Clinton skims over these issues lightly. Of his signing of the Gramm-Leach-Bliley Act repealing part of the Depression-era Glass-Steagall Act that prohibited commercial banks from engaging in the investment business, he argues that it is not self-evident that “the mortgage crisis was hastened and enlarged by the end of the division between commercial and investment banks.”

On the matter of failing effectively to regulate financial derivatives, Mr. Clinton writes, “I can be fairly criticized for not making a bigger public issue out of the need to regulate” them. But he adds the rationalization that he “couldn’t have done anything about it, because the Republican Congress was hostile to all regulations, going so far as to threaten to leave the S.E.C. with no budget because the commissioner, Arthur Levitt, was vigilant in doing his job.”

It’s a fair question. I certainly think he deserves to be heard, as do both Bushes. (Jimmy Carter? Not so much. I prefer that we hear less from him.) The more intelligently we speak of our difficulties the better off we are. Based on this review alone, I’m not sure the book adds that much to the debate. It seems – again, I have not read the book – that it might be a lot of Clinton triangulation and poll-driven writing. I wonder whether there are any unpopular opinions in his conclusions, and how he addresses Medicare and entitlements.

(Reuters) – Freddie Mac, the second-largest source of U.S. mortgage finance, said on Thursday it needed to borrow an extra $6 billion from the federal government as the shaky U.S. housing market resulted in its worst quarterly loss in more than a year.

The government-owned company said it lost $4.4 billion in the third quarter, a big increase from a $2.5 billion loss in the year-ago period.

Low sale prices on foreclosed homes in its inventory, low mortgage rates on its refinanced loans, and losses on derivative investments continued to drain cash from the lender that the government rescued in 2008.

The company warned of further weakness ahead as the pace of foreclosure sales picks up.

Freddie Mac has already drawn $72.2 billion in taxpayer funds and needs extra public money to cover its latest loss plus a $1.6 billion dividend payment to the U.S. Treasury.

The company and its larger rival Fannie Mae were seized by the government at the height of the financial crisis in 2008 as mortgage losses piled up, threatening their solvency.

Given the crucial role the two play in the U.S. housing finance system, owning or guaranteeing about half of all mortgages, the U.S. Treasury has seen them as too important to fail.

The U.S. economy grew modestly over the summer after nearly stalling in the first six months of the year, lifted by stronger consumer spending and greater business investment.
The Commerce Department said Thursday that the economy expanded at an annual rate of 2.5 percent in the July-September quarter. That’s nearly double the 1.3 percent growth in the April-June quarter, and a vast improvement over the anemic 0.9 percent growth for the entire first half of the year.

We will need growth of around 4% to see the unemployment rate come down. At first we can actually expect it to increase as discouraged workers who have given up looking for work begin to look again. They will then be classified as unemployed. It seems contradictory that the economy can be growing and more people working while unemployment increases, but it’s only a bean-counting contradiction. In reality, the total number of people who are not working (over 14 million) will decrease while those classified as unemployed will increase. The former is far more important.
How will this impact the elections next year though? Whoever is blamed for the economy will lose the election, and both parties know this.

In August, many thought the economy was headed for another recession after the government said GDP fell to less than 1 percent for the first six months of the year. High gas prices, the growing debt crisis in Europe and wild fluctuations in the stock market also contributed to those fears, which have receded in recent weeks after reports showed improvements in hiring and consumer spending.
Economists expect growth in the range of 2.5 percent to 3 percent in the October-December quarter and for all of next year — just enough to keep the unemployment rate from rising.
For the 14 million people who are out of work and want jobs, that’s discouraging news. And it’s an ominous sign for President Barack Obama, who will be facing voters next fall.
“We are looking at very disappointing growth over the next year. It will be far short of what is needed to get businesses to hire more aggressively,” said Mark Zandi, chief economist at Moody’s Analytics.

(As an aside, in the first paragraph “the many” are economists. They were wrong with their August predictions. The second paragraph gives their latest predictions. Why do we still believe them when they give such specific numbers with confidence? But I digress.)
I do think the economy will continue to grow at higher than “anemic” rates. I doubt it will be high enough to really dent the unemployment rates and boost Obama in 2012, especially if the unemployment rate increases while total unemployment decreases as mentioned above. It is very simple to understand, but a hard political sell in a campaign culture of gotcha moments and twenty-second soundbites. Regardless, if the economy tanks Obama is done. If the economy continues on its current path he’s in trouble. They are praying for an econmic miracle.